[MCCompliance]

My bank charges a fee at closing for future lien release and I am hoping for some clarification if this should be included as a finance charge.

We collect this fee upfront and hold it in a misc. expense GL. It is not specifically reconciled. When a loan is paid off, we will review the loan docs and will take that amount from the GL to pay the fee.

Reading 1026.4 seems like the fee would be excluded if it will be paid to public officials. However, I have heard other opinions.

– (e) Certain security interest charges. If itemized and disclosed, the following charges may be excluded from the finance charge:

(1) Taxes and fees prescribed by law that actually are or will be paid to public officials for determining the existence of or for perfecting, releasing, or satisfying a security interest.

Thoughts if this should be included?

[kowsley]

A future lien release may be excluded from the finance charge if it is itemized and disclosed properly as it is considered a tax paid to a public official for releasing a security interest in the property. As long as the bank is not holding the fee in an account for future use, i.e. an escrow account, it may be excluded. It sounds to me that while you are holding it in a misc. expense GL, it is not being utilized for future use but instead held until release of the lien. I think you are fine to exclude the fee from the finance charge.

[MCCompliance]

Thank you!

I have another question relating to this. What section of the Loan Estimate should this fee be disclosed?

[kowsley]

The fee would be aggregated in the Recording Fees and Other Taxes line item of the Loan Estimate. We have only received oral clarification from the CFPB that including the fee in this line item will meet the necessary requirement for “itemizing and disclosing” necessary to meet the exemption from the finance charge. Keep in mind, you are unable to add a line item in this section of the LE or CD.

[MCCompliance]

Thank you for this information, it is very helpful!

[Author]

Posts